Effects of Decentralisation and Flexibility of Active Labour Market Policy on Country-Level Employment Rates

This chapter examines the relationship between flexibility in the management of labour market policy and employment outcomes. The flexibility index is related statistically to factors affecting employment rates at the country level and to employment rates directly. Directly and indirectly relating the flexibility index to employment rates provides insight into the various paths that flexibility may take in affecting labour market outcomes. The econometric analysis suggests that sub-regional flexibility is positively and statistically significantly related to employment rates in the countries surveyed. One explanation is that sub-regional flexibility leads to more responsive and customised active labour market programmes, which in turn direct more training resources to those who need it, resulting in a positive effect on employment rates.